An electric water heater is one that heats water using electricity as its main power source. There are a couple of different types of electric water heaters. One is the traditional tank electric water heater, which comes in a couple of variations. The other is the electric tankless water heater.

A traditional electric water heater, one with a tank, is criticized for being one of the most energy inefficient forms of water heaters available. Therefore, many contractors recommend choosing an electric water heater only if there are no other options available. The most common alternative is a natural gas water heater.

The efficiency of an electric water heater, or any other heater, is measured by how much it costs to produce a million British Thermal Units (BTUs) of heat. Natural gas water heaters cost $12.18 US Dollars (USD) to produce a million BTUs on average, according to the United States Department of Energy. In comparison, an electric water heater costs $31.21 to produce the same amount of heat. Given that water heating is often the second highest energy cost in a home, up to 15 percent of the total energy bill, this is a considerable expense.

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Though there are ways to make a traditional electric water heater more efficient, such as using proper water heater insulation and choosing the right size and water temperature, it is still going to be somewhat less efficient than comparable models. This is because the electric water heater has standby losses, which is the heat lost while the water is waiting to be used. There is no way to avoid this loss as long as heated water is being stored for long periods of time.

One of the more efficient forms of electric water heater models is the tankless water heater. Instead of storing hot water, it heats water when it is needed. It accomplishes this by running water through pipes equipped with heating elements. The water is nearly instantly heated and then sent through the pipes to its destination. This saves money because the heat is only on when the water is being heated.

Another way to save money with an electric water heater is to install a solar heater that uses electricity only when needed. In many cases, a solar water heater may be able to adequately handle most of the water heating needs. On overcast days or shorter winter days, a solar water heater may need to use some electricity to provide an adequate supply of hot water. However, this does not increase the overall energy efficiency of the water heater, it simply uses a different, and cheaper, energy source.

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